Big opportunities for South African manufacturers in Africa
With growth rates exceeding that in the developed world – at an average of between 4% and 5% between 2002 and 2014 – African countries provide investors with ample reason to tap into booming consumer demand, says Manufacturing Circle executive director Coenraad Bezuidenhout.
With relative ease of access to sub-Saharan Africa and beyond, and an understanding of the region, South African manufacturers can get ahead of other investors looking to Africa for new opportunities.
“In particular, Africa represents a large and growing opportunity for fast-moving consumer goods (FMCG) companies and retailers and the rapid expansion of Africa’s consumer class should convince companies to think differently about Africa,” he says.
Bezuidenhout adds that 800-million people are urbanising in Africa this decade – the biggest urbanisation movement in the world. This means huge opportunities in terms of fast-moving and durable consumer goods for manufacturers.
“Added to this are huge energy developments and easing terms of trade, which means satisfying demand from these markets will become more profitable going forward than they ever were before,” he says.
The Manufacturing Circle is one of the strategic partners of the upcoming Manufacturing Indaba, set to take place at Emperors Palace on June 29 and 30, 2015, in Ekurhuleni, the host city and the location of government’s reindustrialisation and revitalisation plans.
The current economic conditions in Africa make it the prime place and time for South African manufacturers to introduce their products to the African market, particularly FMCGs.
In 2010, a report published by McKinsey forecast total growth in compound annual gross domestic product (GDP) per capita of 4.5% until 2015, which is expected to boost consumer spending by more than 35%.
“With population growth of 2% and continued urbanisation, we estimate that 221-million basic-needs consumers will enter the African market by 2015. As a result, the total number of nations with more than ten-million consumers and with gross national income exceeding $10-billion a year will increase to 30 from 22.”
According to the McKinsey report, GDP per capita is the single most important driver of global growth in the consumption of FMCGs, accounting for an average of around 73% of total growth across 60 product categories.
While the influence of other factors, such as education and local customs, varies between categories, GDP per capita dominates how much money people spend in Africa because most markets are in the early stages of development.
It is critical that South African manufacturers move swiftly to seize the African opportunity.
“The degree to which South African manufacturers will be able to leverage opportunities in Africa will be a significant driver of their attractiveness to investors all over the world, as will the terms of trade we are able to negotiate with our non-African trade partners,” Bezuidenhout states.
In addition to the Manufacturing Circle, other strategic partners of the Manufacturing Indaba include the Department of Trade and Industry, the City of Ekurhuleni, Deloitte South Africa and the The National Cleaner Production Centre of South Africa.
The inaugural Manufacturing Indaba drew 240 delegates last year, with both the private and public sectors represented at the workshop and networking sessions around the growth of South Africa’s manufacturing industries. Robust debate and discussion were held with delegates from government departments, the private sector, manufacturing industries and the broader African continent considering the role of government policy in boosting South Africa’s manufacturing industries.
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